WEST VIRGINIA CODE

WVC 33 - 8 A- 6
§33-8A-6. Custody agreements; requirements.
(a) An insurance company may, by written agreement with a
custodian, provide for the custody of its securities with a
custodian. The securities may be held by the custodian or its
agent or in a clearing corporation or in the federal reserve
book-entry system. Securities so held, whether held by the
custodian or its agent or in a clearing corporation or in the
federal reserve book-entry system, are referred to herein as
"custodied securities".

(b) The agreement shall be in writing and shall be authorized
by a resolution of the board of directors of the insurance company
or of an authorized committee of the board. The terms of the
agreement shall comply with the following:

(1) Certificated securities held by the custodian shall be
held either separate from the securities of the custodian and of
all of its other customers or in a fungible bulk of securities as
part of a filing of securities by issue (FOSBI) arrangement.

(2) Securities held in a fungible bulk by the custodian and
securities in a clearing corporation or in the federal reserve
book-entry system shall be separately identified on the custodian's
official records as being owned by the insurance company. The
records shall identify which custodied securities are held by the
custodian or by its agent and which securities are in a clearing
corporation or in the federal reserve book-entry system. If the
securities are in a clearing corporation or in the federal reserve book-entry system, the records shall also identify where the
securities are and if in a clearing corporation, the name of the
clearing corporation and, if through an agent, the name of the
agent.

(3) All custodied securities that are registered shall be
registered in the name of the company or in the name of a nominee
of the company or in the name of the custodian or its nominee or,
if in a clearing corporation, in the name of the clearing
corporation or its nominee.

(4) Custodied securities shall be held subject to the
instructions of the insurance company and shall be withdrawable
upon the demand of the insurance company, except that custodied
securities used to meet the deposit requirements set forth in
section six, article three of this chapter shall, to the extent
required by said section, be under the control of the state
treasurer and shall not be withdrawn by the insurance company
without the approval of the insurance commissioner.

(5) The custodian shall be required to send or cause to be
sent to the insurance company a confirmation of all transfers of
custodied securities to or from the account of the insurance
company. In addition, the custodian shall be required to furnish
no less than monthly the insurance company with reports of holdings
of custodied securities at times and containing information
reasonably requested by the insurance company. The custodian's
trust committee's annual reports of its review of the insurer's trust accounts shall also be provided to the insurer. Reports and
verifications may be transmitted in electronic or paper form.

(6) During the course of the custodian's regular business
hours, an officer or employee of the insurance company, an
independent accountant selected by the insurance company and a
representative of an appropriate regulatory body shall be entitled
to examine, on the premises of the custodian, the custodian's
records relating to custodied securities, but only upon furnishing
the custodian with written instructions to that effect from an
appropriate officer of the insurance company.

(7) The custodian and its agents shall be required to send to
the insurance company:

(A) All reports which they receive from a clearing corporation
or the federal reserve book-entry system on their respective
systems of internal accounting control; and

(B) Reports prepared by outside auditors on the custodians or
its agent's internal accounting control of custodied securities
that the insurance company may reasonably request.

(8) The custodian shall maintain records sufficient to
determine and verify information relating to custodied securities
that may be reported in the insurance company's annual statement
and supporting schedules and information required in an audit of
the financial statements of the insurance company.

(9) The custodian shall provide, upon written request from an
appropriate officer of the insurance company, the appropriate affidavits, substantially in the form attached to this regulation,
with respect to custodied securities.

(10) The custodian shall secure and maintain insurance
protection in an adequate amount covering the custodian's duties
and activities as custodian for the insurer's assets and shall
state in the custody agreement that protection is in compliance
with the requirements of the custodian's banking regulator. The
commissioner may determine whether the type of insurance is
appropriate and the amount of coverage is adequate.

(11) The custodian shall be obligated to indemnify the
insurance company for any loss of custodied securities occasioned
by the negligence or dishonesty of the custodian's officers or
employees, or burglary, robbery, holdup, theft or mysterious
disappearance, including loss by damage or destruction.

(12) In the event that there is a loss of custodied securities
for which the custodian shall be obligated to indemnify the
insurance company as provided in subdivision (11) of this
subsection, the custodian shall promptly replace the securities or
the value thereof and the value of any loss of rights or privileges
resulting from the loss of securities.

(13) The agreement may provide that the custodian will not be
liable for a failure to take an action required under the agreement
in the event and to the extent that the taking of the action is
prevented or delayed by war (whether declared or not and including
existing wars), revolution, insurrection, riot, civil commotion, act of God, accident, fire, explosion, stoppage of labor, strikes
or other differences with employees, laws, regulations, orders or
other acts of any governmental authority, or any other cause
whatever beyond its reasonable control.

(14) In the event that the custodian gains entry in a clearing
corporation or in the federal reserve book-entry system through an
agent, there shall be an agreement between the custodian and the
agent under which the agent shall be subject to the same liability
for loss of custodied securities as the custodian. However, if the
agent shall be subject to regulation under the laws of a
jurisdiction that is different from the jurisdiction the laws of
which regulate the custodian, the insurance commissioner of the
state of domicile of the insurance company may accept a standard of
liability applicable to the agent that is different from the
standard of liability applicable to the custodian.

(15) The custodian shall provide written notification to the
insurer's domiciliary commissioner if the custodial agreement with
the insurer has been terminated or if one hundred percent of the
account assets in any one custody account have been withdrawn.
This notification shall be remitted to the insurance commissioner
within three business days of the receipt by the custodian of the
insurer's written notice of termination or within three business
days of the withdrawal of one hundred percent of the account
assets.

Note: WV Code updated with legislation passed through the 2016 Regular Session
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